Saudi Arabia increases bank reserve requirements

08 April 2008
Saudi Arabian Monetary Agency (Sama) has increased the proportion of assets which banks must hold in reserve, in a bid to reduce liquidity and help stem rising inflation.

The move to increase the reserve requirements was effective from the beginning of April. It pushes the ratio of reserves which banks must hold from 10 per cent of their deposits and other assets, to 12 per cent. It is the third time Sama has increased reserve levels since November.

Sama hopes that the change will help reduce the level of money supply in the economy, which grew by 23.9 per cent in the year to January. Economists consider high money supply an indication of inflationary pressures still to work through the economy.

Inflation in the kingdom reached 8.7 per cent in February, the highest level for 27 years.

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